Government ready to issue new bonds

The Jakarta Post, Jakarta

The government is on track to issue a huge amount of treasury bonds later this month as the preparations are nearing completion, a senior finance ministry official said.

Fuad Rachmany, head of the state bonds management center -- a body under the finance ministry, told reporters on Wednesday that what was left to be completed at the moment were just technical matters.

"What is left to complete is just a matter of the technical issues of around 20 percent to 30 percent. We will execute the plans very soon," Fuad said.

The House of Representatives has approved the government's plan to issue a total of Rp 7.7 trillion (about US$845 million) worth of bonds this year to help refinance maturing domestic government debt.

The government intends to issue both treasury bonds (longer maturity bonds) and treasury bills (shorter maturity bonds). But it has yet to decide how many T-bonds or T-bills should be issued.

Fuad only said that the government would first issue the T- bonds, but the amount had yet to be decided.

Late last year, the government issued some Rp 2 trillion worth of T-bonds with the issue being oversubscribed, indicating strong investor interest in the government bonds.

Reaffirming Fuad's statement, Bank Indonesia said also that it expected to issue a ruling on the bond issues next week, which would set out the guidelines for the procedures and mechanisms involved.

"I think the ruling can be issued next Monday or Tuesday," Tarmiden Sitorus, the central bank's monetary management division director, told reporters, while refusing to state the exact amount of bonds to be issued in the first tranch, saying that this was still under discussion.

Despite claims by analysts that issuing new bonds would only temporarily shift the country's debt problems, the government has chosen to take such action as part of its strategy to manage its huge public debt.

Without refinancing, the government will risk sending the country into a fiscal disaster.

As of December last year, the country's domestic debts stood at Rp 650.4 trillion -- all in the form of bonds, with a large chunk of them maturing between 2004 and 2009.

Of the total domestic debts, local banks held most of them with some Rp 430 trillion worth of recap bonds, while Bank Indonesia received another Rp 144 trillion in bonds to replace an equal amount it had spent in providing liquidity supports loans (BLBI).